What to ask borrower before loaning private money?

[Michael Rybas]

Hi,

I'm new to loaning money for real estate deals and looking for advice on questions to ask the borrower.  A fiend asked me to loan him money for 3 properties that will be demoed and 3 row homes with 3 apartments each will be built.  After completion of the project, he plans to refinance the property and pay off my investment.  

What things do I need to do to cover my butt? Is it better to get a personal promissory note vs one from his LLC?

[Chris Seveney]

Michael Rybas you will want to borrow to LLC then get a personal guaranty so you can avoid Dodd frank.
Questions to ask (this is not inclusive) include
1. how many deals have they done
2. Show me a pro forma
3. Show me construction estimates
4. Show me comps for sale
5. Show me how much $ they are putting in the deal
6. Have a deed of trust and a note written up

It doesn’t matter if it’s your best friend or your mother , business is business and treat everyone the same.